Question

1. a) T or F: A business operation that is 1) organized according to state or federal statutes as a separate legal entity, and 2) ownership is divided into shares of stock is a corporation.

                (If false, identify and correct the errors.)

b) T or F: A publicly-held company would prefer its external auditor issue a qualified opinion upon examination of its financial data. (If false, identify and correct the errors.)

         2. a) A financial statement that summarizes: 1) assets; 2) liabilities and 3) stockholders’ equity as of a specific date is a(n): ______________________________

b) T or F: Revenues – Expenses = Net Income. Net Income increases retained earnings and the payment of dividends will reduce retained earnings, with no impact on expenses. (If false, identify and correct the error.)  

_____3. Huskie Company incurred a significant loss of property due to a natural disaster. The event occurred three weeks after the year-end reporting period, but prior to the issuance of the financial statements. This is an example of a:

a. Subsequent event that could be anticipated and financial statements should be adjusted prior to issuance.

b. Subsequent event that did not exist at the balance sheet reporting date and should be disclosed in the notes to the financial statements.

c. Subsequent event that does not need to be reported.

d. All of the above are correct.

_____4. You are starting a new business and will provide singing lessons. You have received funding (money) for your business from a bank. Next, you will purchase sound equipment for your business. Which type of business activities does each of these transactions represent?

a. Operating Activities / Financing Activities

b. Investing Activities / Operating Activities

c. Financing Activities / Investing Activities

d. Financing Activities / Operating Activities

5. The following are accounts reported in the financial statements:

A.Balance Sheet                                                 C. Statement of Stockholders’ Equity

B.Income Statement                                          

i.Indicate where each of the following accounts is reported in the financial statements. (Identify all reports that may apply for each item below.)

ii.Identify if the account is permanent or temporary.

_______Retained Earnings                             ________Revenues

_______Cash                                                  ________Receivables

_______Accounts Payable                             ________Land

_______Dividends                                         ________Expenses

Answer 1